Future of banking holds fewer branches, more technology

UnitedOne Credit Union has recently opened a new branch in the lower level of a new apartment complex where H.C. Pranges, Younkers and Boston Store once stood. The new branch can use tellers that appear on a video screen.
Gary C. Klein/USA TODAY NETWORK - Wisconsin

SHEBOYGAN - Walking into the UnitedOne Credit Union branch in Sheboygan, you might be greeted by a teller, but he'll be 25 miles away.

The bank is one of the first in the state to adopt teller machines that connect customers with bankers via video conference, ushering in a new era of digital interaction as consumers continue to move away from traditional branch visits toward mobile solutions.

Banking is in the midst of an industry sea change. Today's consumers are leaving the branch behind as mobile and online banking becomes the preferred channel for day-to-day banking — but the branch isn't dead yet.

“We continue to see increases in digital adoption year over year and our branch visits continue to decline modestly year over year," said Brent Tischler, director of retail banking at Associated Bank. "But the branch, in our mind, is still critically important. Most of our customers still go into our branch a number of times a year — even our customers who are actively using online and digital.”

The majority of consumers, including 86 percent of millennials, report they will use branches in the future, according to a 2016 consumer digital banking survey. While traditional banking transactions are moving toward mobile and online, consumers still visit branches when they want to talk face to face with a personal banker.

“People are becoming more comfortable doing transactions on their phones, taking pictures of checks to deposit them, and transferring money,” said Tammy Pelletier, chief operations officer at UnitedOne Credit Union. “When they come into the branch, they have a problem that they need answered, have a question, or need us to run numbers on a loan.”

Enter the interactive, personal teller machine. The technology came on the scene in 2005 in larger metro areas before expanding to smaller cities like Manitowoc and Sheboygan. Initially, it was seen as a security measure — it's hard to rob a bank with no physical tellers — as much as a customer service feature.

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Now it's also seen as a way to save payroll costs, as employees can be centralized in one location and respond to video teller requests at multiple branch locations. UnitedOne is the first to bring the tech to Manitowoc and Sheboygan counties. Their hub, which they call a "member contact center," is in Manitowoc.

“It’s completely simple, it’s convenient, and it does all of the same things that a teller line can do, all through operating the machine,” said Ryan Manis, director of branch operations at UnitedOne.

The machines look like a traditional ATM — in fact they can be used just like an ATM without interacting with a person — but hit a button and the screen connects live with a teller who can answer questions or help walk through a transaction.

And that personal connection remains integral to the banking industry.

“When the chips are down and you want someone to talk to, you can’t replace that,” said David Borchardt, co-founder of Commerce State Bank. “For our customers, it’s important they can get a hold of someone quickly and get some answers. That human touch is something you can’t replace.”

Pelletier said the machines have not resulted in layoffs, but are more about shifting resources. “It’s not replacing people with machines, it’s using the machines and people to provide the best experience,” she said.

EMV Chip Card(Photo: Submitted by Kohler Credit Union)

Associated Bank is currently piloting a similar digital teller program, but Tischler said he doesn't see it replacing tellers completely. The bank has instead shifted to what he calls "universal bankers," employees who are flexible and can handle both transactions, service interactions, and relationship interactions.

Associated Bank branches are becoming more technologically enhanced to reflect how customers operate, such as enabling WiFi in all branches, having iPads for customer use, and having “digital ambassador” employees to help customers with digital education and adoption.

“We’ve evolved the branch to help facilitate and educate to drive adoption for digital,” Tischler said. “We’ve invested a lot in our branches. Even though we continue to invest in digital, we’ve put a ton of investment within our branches as well because we still think it’s a critical part of our network.”

Critical they may be, brick and mortar branches are still on the decline. Associated Bank, for example, has reduced the number of branches by 1/3 over the last 8 to 9 years. Shrinking in both numbers and square footage, branches are no longer the main focus as banks shift to place more funding in online.

The numbers are clearly driven by digital. Since 2009, United One Credit Union has seen a 32 percent decline in in-branch teller transactions, while electronic transactions grew by 82 percent during the same period.

However, any cost savings realized by reductions in branches is being shifted toward investment in digital as customers expect safe, secure transactions conveniently available on demand.

New technologies continually focus on the customer experience, with banks developing apps and technologies that look and feel familiar to users.

“Our customers don’t just compare our digital experiences with other banks, they compare them with their non-bank experiences too, like Amazon for example,” Tischler said. “We know that we cannot just do one major upgrade every two or three years to our digital platforms. We have to continuously evolve and enhance those.”

Banks are constantly investing in new technology, be it digital deposit software or bio-metric authentication on mobile, but central to any digital platform is security, and banks are finding themselves at the center of cyber safety.

The role of a bank is quickly becoming that of a security firm protecting against cyber problems and fraud, Borchardt said. As a banker, the financial security of clients is his biggest worry.

“That’s where we see losses in our industry: Fraud,” Borchardt said. “Fraud is just brutal right now. We used to worry about loan losses as our No. 1 concern to lose money. Now what keeps me up at night is cyber security. I can prepare for a loan going bad and work that out. I prepare for a cyber attack, but you never know when it’s coming. You always feel like you’re on the defense against the hackers and the fraudsters.”

Borchardt's advice: be cautious with your confidential information and be less forthright with what you put on social media.

“As a society we’re so transparent. I’m surprised at how much the younger generations share about their lives," he said. “Live life with a little bit of skepticism with what you’re doing out there."